Previously we did not have a location we respected across updates. It's true that we did have a location for user settings but as we get closer to our final update story we added a new location. In the future, we will (gracefully) move all user settings here.

The new location is .vscode/extensions under your user directory.

Depending on your platform, this folder is located here:

Windows%USERPROFILE%\.vscode\extensions

Mac$HOME/.vscode/extensions

Linux$HOME/.vscode/extensions

As this location is under your user directory, the content is persisted across VS Code updates. This is just the start and we plan to use this location more in future updates.